by Dana Blankenhorn
Volume V, No. XXVIII
For the Week of July 16, 2001

This Week's Clue: The Next Move is Up

This Week's Clue: The Next Move is Up

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

Cover Me

WTO Gets a Clue, but Draws the Wrong Conclusion 

The Task Ahead

Clued-in, Clueless

There is no longer any doubt. We're either entering, inside, or leaving a recession. 

Recessions, on the whole, are good things. They eliminate excess, they discipline businesses, and they hammer the Clueless. They're not all good, because they favor the big over the small, the old over the new (and there's that nasty unemployment and hunger to contend with), but nothing's perfect.

The best news may be that the headline above will be controversial. Some say that since the market hasn't gone up yet it won't. (A clueless bear is a sure sign the bulls are ready to run.) 

There also remains doubt about whether the "R" word applies to the current time. How can we be in a recession when unemployment is at 4.6%? We can be, because so many of us are freelancers, or have our incomes "conditioned" on some outcome - bonuses, stock options, commissions. When the economy sours we may stay employed, but our incomes do drop. That is a recession, we feel it as one, and that's what I'm feeling right now. (I think you're feeling it too.)

Many analysts are trotting out their charts of the early Depression and saying this is 1930. They say things can't get better for six months, a year, or longer, but don't explain how they will get better even then. This is also good because no rise in stock prices can be expected - bull markets must climb the "wall of worry" to succeed. (If everyone has bought prices fall and vice versa.) 

So why am I certain conditions will improve soon? Interest rate cuts take six months (at least) to have an impact, and the first such cut happened six months ago. Fiscal policy often has an even longer lead-time, but this time people are getting real checks, not a mix of government spending and aid that must be applied for. 

The result is there's a tsunami of liquidity entering the economy. Homebuyers and those with credit cards aren't getting the benefits, because many rates have hit "floors" and will fall no further. But that just means that banks and mortgage institutions are making big profits, money that will burn holes in their pockets until it's invested. 

There is also proof of demand for services, and (yes) for online advertising. The fact that AOL has 41% of the Internet ad market isn't a negative. AOL has about 30% of the U.S. consumer access market - the new figures only mean that those sites and networks that get their acts together can tap advertising demand. 

Failures will remain to distract us . Those who left blood in the water over the last nine months must still become fish food. I predict there will be even-more casualties to come, especially among public companies who had to reveal their troubles to the world. Private companies can hide their problems better, but there will be casualties there, too - just as there are men who die from wars after the armistice is signed, and victims who die of plagues after the cure is found. 

An entire generation of technology has sat on store or distributor shelves, its value wasting to nothing. In the 1930s cars, radios and movies cost more to make each year, and deflation was felt only in commodities. But technology companies have gone ahead and built the next generation anyway. (Most big tech companies have "retained earnings," billions of dollars in cash, guaranteeing this will happen.) The new stuff isn't twice as good as what companies have now - it's four or eight or 16 times as good. Moore's Law is now basic to the economy, and the economic cycle doesn't repeal it. 

Moore's Law is a crucial difference between our time and the 1930s. Another difference is the Internet itself, through which innovation can pass around the world at light speed. This may mean, as the years pass, that wages will be held down by direct competition from India and China and Singapore, but that's tomorrow's challenge, not today's. 

There are plenty of challenges to today's coming prosperity. Copyright owners must begin negotiating with the market, offering their products for sale online at terms buyers will accept. Until that happens, broadband content remains illegal and all the trade in it remains underground. The companies that empower employees, rather than just monitoring them, should also see productivity gains - as time goes by that will mean greater profit. Productivity gains are now being held down by fear and we have nothing to fear but fear itself. 

I need to repeat something here. I'm not a stock analyst. I can't tell you what stocks will rise, when they'll rise, or when and how much the market will rise. While markets usually rise ahead of an underlying economic expansion, this market may be waiting for results before moving. Since many companies are now entering the second year of hard times, earnings comparisons will be easier to meet, so bad won't look so bad and good will look very good indeed. 

I could be wrong. But I now believe the next move won't be to a NASDAQ of 1,000 or a Dow of 8,000. We've bounced along the bottom, flushed out the speculators, built cash reserves and we're waiting for an excuse to buy. One will be forthcoming. 

SSP (Shameless Self-Promotion)

"Living on the Internet: How to Make Money, Live Right, and Fight For the 21st Century" is tentatively due for release around Labor Day. I'm still writing it, but it looks good. I call it the "first book of the 21st century" because it is designed to feature hyperlinks in all formats - PDF, eBook, and print. (How about if we call it an I-Book for short?) Drop me a note to get on the mailing list for more information on this book.

You can join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive.Com. You can also read me at ClickZ , B2B, at Boardwatch, ISP Executive, Sitepoint  and the new (paid) version of WorkZ. More deals are being sought. Remember that it's journalism that keeps the Clues coming...

Shameless Promotion

You have a little list, but how do you make the most of it? You turn it into a database, you query the database, you audit the results and you deliver market research to yourself and to others.

Permission is just the first step. An audit is the second step. Building interactive relationships with every name in your database is the greatest business asset you can have.

You can take the first step toward making your little list truly valuable with help from my friends at Whitehat Interactive - click here to begin that journey.

Takes on the News

Cover Me

We live in a winner-take-all age. You either have reporters covering your sidewalk or you get ignored. You're either number one or no one cares.

Perhaps that's why so few people covered IBM's recent defense of open source from Microsoft's attack. This is an important story. Open source does have a response to Microsoft's .Net, the badly named DotGNU and GNU Mono. You can start work on either project by clicking here.

There's an assumption that .Net has no opposition. This assumption is false. More sites run GNU/Linux than run Microsoft Windows. Windows, in fact, is what IBM was 20 years ago, and IBM's announcement shows it's part of the gang trying to win that control back.

The developers of DotGNU insist their software will scale, and will fully support Microsoft's C-Sharp without requiring use of Microsoft's "shared source" license, which is in fact an oxymoron. IBM is going to be supportive, so is Sun, and so will other big companies. But it will take some effort to get this message across to the market. What GNU most needs is some "open source" (read free) marketing and public relations help.

WTO Gets a Clue, but Draws the Wrong Conclusion

World Trade Organization director general Michael Moore has picked up on the Internet's role in bringing violence to international meetings, but he has apparently learned the wrong lessons from it.

Moore, a former Labour Party Prime Minister from New Zealand, attacked "anti-globalisation dot.com types who trot out slogans that are trite, shallow and superficial" during a meeting in Geneva. He called on non-governmental organizations to "distance themselves" from these "masked stone-throwers who claim to want more transparency."

The problem and answer can both be found on the WTO's own Web site. The site has forums and chats but it is far too top-down in approach. Instead of waiting for people to come to it as servants, it would be better if WTO's members, employees and supporters would use the Net to address people's questions on the sites where they live. They need to hit all these links , identify the concerns, challenge the positions of their opponents on their sites, and then launch attacks only on those sites that don't allow free discussion.

If you want to be for freedom, demonstrate it. Prove your case that your opponents are not anarchists or fascists. Then you'll get a hearing. But ad hominum attacks by themselves won't get the job done. You need to prove your case before you make it.

As a first step, Mike, read this. Learn how Web communities work, and learn how to become a champion inside them. Disseminate that knowledge among any of your supporters, and have them use that knowledge on your behalf. That's how you win a political war in the Internet Age. Today's mini-Hitlers and mini-Stalins are winning only because they are running unopposed.

The Task Ahead

Here are two facts you likely haven't read. Arbitron reports that one-third of U.S. households have some form of broadband access, either at home, work or school. Internet access in the UK continues to skyrocket, with the number of home access accounts growing from 6 to 10 million by May.

The task ahead is not giving people access to the Net - they have it. The task ahead is convincing people to spend more time, and (more important) more money on the Net. Scare campaigns saying that one-third of us are monitored when we access the Net from work won't do it. Fear mongering over Internet porn won't do it. Lurid reports that all our credit card transactions have been "hacked" won't do it.

What will do it? Facts will do it, and reasonable inferences drawn from those facts. Yes, there are problems online, but we shouldn't over-react to them. Yes there are dangerous people online, but we shouldn't give the virtual streets to them in response.

What the industry needs to develop is a realistic set of advisories, an Online Citizen's Guide. Right now such guides are being developed, but only by lawyers and those who want to scare you offline. Instead of giving every precaution, only give those that are reasonable. Write it reasonably. Distribute it widely. If the industry wants a good writer to turn what they have into something reasonable, call me.

Clued-in, Clueless

Clued-in is Mitch Albom, for his brilliant column interviewing a domain name vulture and showing just how lame, greedy and stupid such people are.

Clueless is The New York Times, for putting the documents on its conspiracy against freelancers online, where they could be copied and distributed. They have guaranteed themselves a huge class action lawsuit that will, in time, not only result in a better contract for freelancers (a model for the industry) but also put their work back online where it belongs.

A-Clue.Com is a free email publication, registered with the U.S. Copyright Office as number TXu 888-819. We're on the Web at http://www.a-clue.com.